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A Prefabricated Building Revolution?

Posted byJames Middleton

Friday, 10 October 2014

A lot has been made about the possibilities that modular construction and prefabrication can provide for the building industry. Its supporters claim it can revolutionise the construction industry, limiting costs, reducing build times and creating more efficient processes and methods, but if all this is true then why aren’t we seeing more of it, or is it just a matter of time?

META claims that of the $150 billion contribution to GDP made by the Australian construction industry, the prefabricated housing industry made up only $4.6 billion (3%), although this proportion is set to grow. In fact, Curtin University expects the sector to grow at 5% per annum out to 2023, compared to a growth rate of 2.3% for the industry as a whole. But prefabricated and modular construction has existed for many years now, and despite this, it remains a bit player in the greater market.

The benefits of prefab construction are primarily related to cost reductions and reduced build times. Across the Australian markets, particularly in Sydney, affordability and supply responsiveness are significant issues and hence prefabricated housing provides a great opportunity to enhance its role in the building mix to help provide suitable affordable housing across Australia.

It’s big in Europe, why not here?

Elsewhere in Europe and the US, prefabricated housing makes up a more significant portion of the market. These regions have a much longer history of using prefabricated housing, with it being particularly prevalent in the rebuilding efforts in Europe after World War 2, and as a result there exist large established manufacturers of prefabricated housing with significant expertise in the industry. Coupled with the larger and more dynamic housing markets in these regions, this has helped support a healthy prefab building industry across Europe and North America.

So why hasn’t prefab housing taken off in Australia? The relatively small and geographically fragmented Australian market does create difficulties. The cost benefits of prefab housing are most amplified when construction quantities are higher and economies of scale can be achieved. The vast distances between large population centres in Australia also reduce the benefits as the costs to transport the modules from the manufacturing site to the construction site build up. But perhaps the biggest constraint is that prefab housing is often seen (rightly or wrongly) as an inferior product and thus the demand for these products does not always exist. The fact that prefab housing is ‘cheap and quick’ is both a benefit and a curse, as it often negatively shapes perspectives on this housing type.

Positives And Negatives Of Modular Construction And Prefabrication

However, prefab building techniques have come a long way from those used to quickly rebuild detached houses in the wake of WW2. These techniques can now be used in high rise construction, with a number of apartment and non-residential projects across Australia made up of prefabricated components. Increasingly complex and higher quality designs and architectural features can be incorporated in prefab building, which is helping to change the perception of low quality products. Prefab building is now also beginning to be recognised for its environmental benefits thanks to the often more efficient techniques and use of materials.

What does the future hold?

While the future of prefabricated and modular construction in Australia is looking positive, it is always likely to remain the exception rather than the norm and growth in its market share will be moderate in the short term. Continued technological advances and a growing acceptance of prefab construction amongst builders and the community will be the primary drivers behind increasing uptake, but it will be a slow process. The strongest growth in prefab construction will not be in apartment buildings that go up in 10 days or fully built houses being dropped off at construction sites by semi-trailers but in modular components. The increasing use of these components and supporting techniques will be a more gradual trend in the building industry but still offers significant gains in efficiency, costs and sustainability.

So in short, whilst the reports of a six storey apartment building in Perth being built in ten days are impressive and exciting, they are unlikely to be game changing. Affordability concerns across Australia are not solely due to costs in the building process (although this obviously contributes), with supply side constraints, such as land supply playing a larger role. However, modular construction will play an increasingly significant role in the Australian building industry moving forward (particularly in the affordable housing sector) by being at the cutting edge of new technologies and techniques, so watch this space.

About us
BIS Shrapnel’s Building Forecasting specialises in regular forecasting reports on the residential and non-residential sectors across cities, regions, states, and countries. We provide a thorough analysis of the drivers of demand and supply, as well as forecasts of major market variables including building approvals, commencements, completions and work done.